Explain the control of authorization of credit
Course:- Auditing
Reference No.:- EM132815

Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Auditing

Question: You have been given to work on the accounts receivable section of the 2013 audit of XYZ. You have completed your study of the internal controls or attribute sampling over sales and receivables and have decided that the input control over collectability of accounts receivable is the support of credit authorization) prior to shipping customer orders. This is verified by the initials of the credit supervisor on the company's replica of the sales order. The auditor has decided to utilize a sample size of 150.

The next step is to test to see if the control is operating as explained.

The following is provided.

Acceptable risk of incorrect acceptance (beta risk) = 5%.

Expected population deviation rate = 2.5%

Tolerable deviation rate = 6%

Based on the work done, you discovered that three sales orders did not have the credit supervisor's approval.


Prepared in good form a working paper and conclude whether the auditor can rely on the control of authorization of credit. Your working paper could add the sampling steps identified in the textbook for tests of controls.


Verified Expert

Preview Container content

The required testing has been done for the testing of controls in the enterprise. In this process, the accounts receivable and the sales have been tested over a period of time. At the initial level the process of sales and the collectability of the same were understood. On the basis of discussion with the concerned person and the Standard Operating Procedures of the company it has been understood that the credit is provided to the customers on the basis of credit authorisation, in the form of initials of the credit supervisor of the company.

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Auditing) Materials
Identify a current emerging issue or significant risk faced by internal auditing (one issue only). I recommend searching the web sites listed in the Course Resources or arti
What is the rationale for accounting for (nonexpendable) endowment funds on the full, rather than a modified, accrual basis? Why is it important that depreciation be charged
Determine the significance of the notes to the financial statements - Clarify the process by which fund financial statements are converted to government-wide financial stateme
There are several different professional codes of conduct. How does an accountant or auditor determine which code of conduct to follow? Provide examples.
Determine the key internal controls needed over the communication of confidential information to outside parties, and analyze the manner in which these controls act as a det
Discuss what lapping means. What procedures can auditors employ for its detection? What is a cutoff bank statement? How are they used by auditors?
Your medical office has decided to audit all medical records for government compliance. As a medical office manager, you must utilize research to complete an operational plan
Define actual and perceived independence, and explain the importance of each - discuss possible alternative courses of action the auditor should have taken in order to properl